Most sales of immovable property are concluded subject to one or more suspensive conditions. One of the legal definitions of a suspensive condition is that it is a condition which suspends the operation or effect of one or more of the obligations under a contract until the condition is fulfilled. In other words it makes the contract dependant upon the occurrence of a determined future event, for example Purchaser obtaining a loan. Very few people can afford to purchase their home for cash and the two most common suspensive conditions which are contained in Deeds of Sale/Offers to Purchase are that the sale is subject to the Purchaser obtaining a loan from a financial institution (a bond) or alternatively that the sale is subject to the sale of the Purchaser's property. The legal consequences of including a suspensive condition in a contract are that the contract does not become finally binding on the parties until the suspensive condition is fulfilled. However, even though a contract which is subject to a suspensive condition is not immediately finally binding on the parties, a binding contractual relationship does come into existence between the parties as soon as the contract is signed in the sense that neither of the parties can resile from the agreement whilst the contract is subject to the suspensive condition. If the suspensive condition is timeously fulfilled then the contract becomes finally binding on the parties. If the suspensive condition is not timeously fulfilled then the contract lapses and no binding agreement comes into existence between the parties. If for example a Deed of Sale relating to the sale of a property is subject to the Purchaser being granted a bond by a certain date and the bond is granted prior to that date then the agreement immediately becomes finally binding on the parties. If, however, the bond is not granted by that date, the agreement lapses on that date and is not binding on the parties. When a suspensive condition is inserted in a contract it is extremely important to insert the date by which the suspensive condition must be fulfilled. If no date is inserted the legal position is that the suspensive condition must be fulfilled within a reasonable period. This normally leads to uncertainty as it is often difficult to determine what a reasonable period is under the circumstances. When a Purchaser who is purchasing property intends paying the purchase price or part thereof from the proceeds of the sale of his existing property it is absolutely essential to insert a condition in the Deed of Sale to the effect that the sale is subject to the sale of the Purchaser's property and furthermore that the purchase price or part thereof will be paid from the proceeds of the sale of the Purchaser's property. If the Purchaser has already sold his property but has not yet received payment of the purchase price then it is equally important to record in the Deed of Sale that the Purchaser's property has been sold and that the purchase price of the property that he is purchasing will be paid from the proceeds of the sale of his property. If suitable clauses are not inserted the Purchaser could be severely prejudiced in that the Seller could insist on payment of the purchase price before the Purchaser is in a position to make payment.

The two most common suspensive conditions which are encountered in contracts relating to the sale of land are the condition that the sale is subject to the purchaser obtaining a loan by a certain date, or that the sale is subject to the sale of the purchaser's property by a certain date.

The date by which the condition must be fulfilled should always be inserted in the contract. In other words, the date by which the loan must be obtained, or the purchaser's property sold must always be inserted. If the loan is not obtained or the purchaser's property sold by the specified date, then the contract lapses and is not binding on the parties.

In practice, it quite often occurs that the purchaser does not obtain a loan or sell his or her property by the specified date, but the parties thereafter agree to extend the date. Quite often this agreement (to extend the date) is reached verbally. This creates considerable problems in practice, as such a verbal agreement to extend the date is not legally binding on either the seller or the purchaser.

If, for example, a sale is subject to the purchaser obtaining a loan by 31st March and the purchaser does not obtain the loan by that date, but the seller and purchaser thereafter agree verbally to extend the date to 15th April, and the purchaser obtains the loan by the extended date, the contract is nevertheless not binding on the parties. Neither the seller nor the purchaser can be forced to proceed with the sale, even though the purchaser has obtained the loan by the extended date. The sale lapsed when the loan was not obtained by 31st March and cannot be revived by the seller and the purchaser entering into a verbal agreement to extend the date by which the loan must be obtained.

The correct procedure in the example referred to above is for the seller and purchaser to enter into a written agreement which provides for the revival of the original agreement and the extension of the date by which the purchaser has to obtain the loan. Alternatively, the parties can enter into a completely new agreement that extends the date for the obtaining of the loan by the purchaser. Of course, such agreements (the revival agreement or the new agreement) must be signed by the parties. This procedure must be followed in all cases where a sale has lapsed due to the non-fulfilment of any suspensive condition and the parties wish to revive the sale and extend the date for the fulfilment of the suspensive condition.

If the parties elect to enter into an agreement to revive the initial sale (rather than enter into a completely new agreement), then care must be taken with regards to the drafting of such an agreement. I advise sellers, purchasers and estate agents to seek advice from an attorney under such circumstances.